income tax
Indonesia's updated taxation framework for 2024 emphasizes structured policies for individual and corporate taxpayers. The official taxation website serves as a valuable resource for tax-related information. Individual taxpayers are required to calculate their taxable income by deducting allowances, including IDR 54 million for themselves and additional amounts for dependents. Tax rates vary from 5% to 30%, depending on income brackets. Corporations face a corporate income tax (CIT) rate of 22%, with specified deadlines for filing and payment. Small enterprises with annual turnovers under IDR 50 billion qualify for reduced tax rates. The Value Added Tax (VAT) is set at 11%, while luxury goods incur a 12% VAT under the Luxury Goods Sales Tax (LGST) framework.
Corporate deductions may include ordinary business expenses, start-up costs, and specific charitable contributions. Limited interest deductions are permitted, and net operating losses can be carried forward for five years. Tax filings can be submitted electronically or through traditional paper methods, with e-Filing gaining popularity. Payments to foreign affiliates are also subject to withholding tax to maintain compliance with international standards. Indonesia’s taxation system seeks a balanced approach to encourage economic growth while ensuring fiscal responsibility.
An Individual Taxpayer is defined as anyone earning income through employment or independent personal services. These taxpayers are responsible for calculating their Tax Payable at the end of each year to determine if they owe additional taxes or are eligible for a refund.
Taxpayers must report all types of income received inside and outside the nation, which contributes to their overall wealth, in order to fulfill their tax obligations or receive refunds for any excess payments.
To calculate taxable income, the following deductions are allowed:
This results in the determination of Non-Taxable Income based on the facts and circumstances at the beginning of the Tax Year.
The income tax rates for Individual Taxpayers are structured as follows:
(Exchange rate: 1 IDR approximately equals 0.0053 Indian Rupee or 0.000062 USD)
After determining Taxable Income and Tax Payable, taxpayers must factor in tax credits from any taxes paid, resulting in Accrued Income Tax Payable.
Taxpayers must be aware that their Accrued Tax Payable may not always result in a positive balance. In cases where tax credits exceed Tax Payable, taxpayers can either apply the overpayment to the next tax period or request a refund from their Tax Office (KPP).
A Tax Return is a formal document that Taxpayers use to report calculations related to their tax, including Taxable and Non-Taxable Objects, as well as their assets and liabilities in compliance with tax laws.
All registered business entities must file an Annual Income Tax Return. Corporate Taxpayers must ensure their Tax Returns are completed in Indonesian, using the Latin alphabet, Arabic numerals, and Rupiah currency. Any corporate entity maintaining its books in English and USD must still submit its Tax Return in Indonesian, excluding financial statements.
Tax returns can fall into the following categories:
Formats include electronic and paper submissions.
The e-Filing process allows taxpayers to upload files using the e-SPT application or complete a downloadable e-Form from the Directorate General of Taxes website. Non-compliance may result in penalties or actions from tax authorities.
Taxpayers must submit various documents alongside their Tax Returns, which may include:
The current VAT rate remains at 11%, while luxury goods are taxed at 12%, reflecting a steady and measured fiscal policy.
The Corporate Income Tax (CIT) rate is 22%. Key deadlines include:
Businesses can deduct expenses incurred in regular operations. Acceptable depreciation methods include both straight-line and declining balance methods. Interest expenses are only deductible under certain circumstances, and net operating losses can be carried forward for five years.
Withholding tax applies to royalty, interest, and service fee payments to foreign non-resident entities. Deductions for payments from branches to headquarters may be limited under specific conditions.
Small enterprises, defined as corporate taxpayers with an annual turnover under IDR 50 billion, are eligible for a 50% tax discount on taxable income derived from the gross turnover up to IDR 4.8 billion. The small enterprises' income tax is set at 0.5% on turnover for those with gross turnover under IDR 4.8 billion. Note that there are no provincial or local taxes applicable in Indonesia.